iSuppli: iPhone 4 parts cost $187.51
Update: As pointed out below, our original analysis here did not highlight the difference between the subsidized pricing (what consumers pay with a 2-year contract) and the much higher unsubsidized price (what carriers pay Apple for each phone). The unsubsidized price of the 16 GB iPhone 4 is not disclosed by Apple but is likely to be about $599, the same as the original pricing on the 3GS. iSuppli's pricing methodology has been criticized in the past for inaccuracy. We apologize for the error.iSuppli has done its usual thing with the16GB iPhone 4's components, calculating the raw cost of each of them, and the total comes to: US$187.51. The most expensive thing in the phone is the retina display screen, which is supposedly running Apple $28.50 per unit. The A4 processor adds $10.75 to the unit price, and the gyroscope adds $2.60, as compared to the accelerometer's estimated 65 cent cost.
You may remember that the iPhone 3GS was estimated to have components costing $179 last year at release -- the price on those parts has dropped to $134, even though the phone itself is being sold at $99
The 3GS was also $199 at launch [presumably $599 unsubsidized], which means that Apple is making $10 less per phone with the iPhone 4, but maybe they're making up the costs elsewhere, maybe in advertising or R&D. Of course, these are all estimates -- there are all sorts of other factors going into this cost equation, both internally at Apple and in the manufacturing industry. But iSuppli has been doing this for a while now, and if they say the screen is the priciest component in your new iPhone, they're probably right.
[via BGR]
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Update: As pointed out below, our original analysis here did not highlight the difference between the subsidized pricing (what consumers...
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My iPhone 4 had hardware problems and has since been replaced and when it was replaced at the Genius Bar the box they opened had $199 on the sticker. I questioned the Apple employee - making sure that I was getting the 32GB model - the Apple employee stated "All the replacement part iPhone 4's are $199"
June 30 2010 at 12:21 AM Report abuse Permalink rate up rate down ReplyI think the moral of the story of the iSuppli breakdown is that we now know why the memory capacity didn't increase to 32GB and 64GB, which many people were expecting.
The other component costs in the new iPhone 4 have already increased to a point larger than last year's model, and increasing the memory would have either raised the price of the finished product (something Apple rarely does -- they love selling improved models at last year's prices), or cut into their profits (another thing Apple rarely does).
What a bunch of amateurs running this web site. You don't even read your own output do you? Are you really just having to 'presume' that the 16Gb iPhone 4 is $599 off-contract or did Steve Sande really report on TJ Luoma's call to AT&T...?
http://www.tuaw.com/2010/06/07/atandt-announces-no-commitment-early-update-pricing-for-iphone-4/
I know you guys get paid buy the post, but please, try to put your brain in gear before hitting the keyboard.
"The 3GS was also $199 at launch, which means that Apple is making $10 less per phone with the iPhone 4"
*FACEPALM*
You guys don't want to know what a 4G iPhone is going for in China right now..
Current prices are between 10-13,000RMB (+-2000USD) for an English 16G, or 8k for a US 16G iPhone 4G. (+-1200USD)
Prices will drop to the usual HK$ price of 5000-6000HK$ (RMB local pricing about the same sold locally) once the HK iPhone comes out, but the scarcity of current stock means that its a sellers market.
Personally I can wait a month for a phone in China, but quite a few people can't!
Head over to the actual iSuppli breakdown and certain things are revealed.
Firstly, I have no idea how accurate iSuppli's estimates of the various component costs actually are. I'm sure I could come up with an estimate of $3.80 for "Misc. Interface & Sensor Components" - "Discretes, Passives, etc." but I would simply be plucking the figure out of my backside. Does anyone know how accurate they really are, or are they just fishing for headlines?
Secondly, the total price of $187.51 (can they really be so sure about the 1c?) is for a bill of materials. That means the actual bits and pieces - not an assembled iPhone. iSuppli expressly says: "Teardown costs account only for components and do not include other expenses such as manufacturing, software, royalties and licensing fees."
So, $187.51 gets you a bucket of bits. Then you have to assemble it all together into a phone. Then you have to put the firmware and software onto it. Then you have to pay royalties and licensing fees for any technology you are using (e.g. GPS patents, things like H.264, etc.) that you don't own. Then you have to package the phone up and ship it around the world. You have to build and maintain Apple stores to sell the phone, buy or rent office space, and keep permanent support staff to maintain it. You have to do marketing and advertising or people won't buy it. And now that iOS is a free upgrade for everyone, you have to pay designers, engineers and developers to be working on the next generation stuff you have to build to keep your market edge.
Sure, somewhere in there Apple is also making a profit for its shareholders. But some of the people commenting on this article seem to think that if you take $599 and subtract $187.51, then Apple just pockets the difference. That is a naive viewpoint.
In any manufacturing and distribution operation it is always people that are the highest cost. By the time everyone sticks their mark-ups on, you would naturally expect that the bits and pieces themselves are going to be a relatively small proportion of the total retail price, typically less than a third.
That's exactly what's happening here, and I bet a similar breakdown analysis of one of the competitor's phones would reveal about the same proportion of its retail price for the hardware components alone.
One of the really interesting things to me about the smartphone market is that even though everyone says Apple's prices are high, none of the competitors (Droid, Blackberry, Nokia, etc.) has been able to put out a phone with anything like the same comparable features that significantly undercuts the iPhone.
This indicates that Apple has got the iPhone price about right and cost is not a factor in most consumer's choices. Compare this to the PC market where for years many people have bought a Windows or Linux machine purely on $ per feature, even though they would prefer to buy a Mac if felt they didn't have to spend a few $100s more for nearly the same thing.
Totally. How did iSuppli calculate the A4 cost, you can't buy one, things similar but not the same and as of this point i have read nothing anywhere that breaks down the A4 except for generalized claims of "some things are streamlined" or "it's a bit modified"
Next, as Apple has moved away from off the shelf parts to more engineered solutions such as CPU/gpu, power management, antenna and other manufacturing related parts iSuppli's alleged breakdown price is looking less accurate. They are nearly clueless.
The UAW article is also strange and inaccurate.
There was no 8gig 3GS for Apple to "clear stock" of. It's a newly manufactured unit. 3GS was only in 16 & 32
Next, how an Apple blogger can fail to understand that $199 is a subsidized price.
Someone fire this writer or at least give em the lash
What utter garbage this post is. That price is the subsidised price, not the actual full price.
TUAW is a load of junk these days.. any idiot can write a posting. Seriously.. I can't believe how stupid this blogger is!
I concur. Like Steve Jobs said - it really is becoming a nation of idiotic bloggers.
I wonder if you have to be able to read to blog or if that's just "preferred"
June 28 2010 at 8:59 PM Report abuse Permalink rate up rate down ReplyNot only is this just a rehash of the same news which everyone has posted, the analysis is completely useless. I don't normally give you guys a hard time when you make mistakes, but did you think for a second before writing this? On what planet can a company sell a device for $199 when the parts cost $187.51?! The $199 price is *heavily* subsidised, and there is no sense in comparing it to the cost of the parts.
June 28 2010 at 6:43 PM Report abuse Permalink rate up rate down ReplyFirst the device has a "subscription" fee they get from AT&T so it's not really $199, probably more like $399 wholesale.
The key thing these analysis lack is any knowledge of how manufacturing works. The cost of the "pieces" (which are wholesale products in their own right) is not the cost to put them together. In manufacturing there is a rule of 1-3-9. Raw materials cost 1x/the factory charges 3x wholesale/ various the distribution channel charges 3x more (of 3X) so most retail items are about 9x what the raw parts are.
In short with Apple's rumored 40% margin (meaning 40% of retail is over cost, or 80% above wholesale) So using the $179 numbers, $599 is about a "normal" retail markup structure... it's far worse for clothing, toys, anything sold at a "mall" retailer is closer to the 9x.
Actually, that planet is earth for many devices that either are entering a new market against established players (original xbox) or are selling real bad and risk losing their previously dominant foothold in their market (ps3). No scenario of the above applies to iphones though, as around half a million will buy it before even seeing it up close and that gives Apple a great base to expand on.
June 29 2010 at 2:17 AM Report abuse Permalink rate up rate down ReplyCan you please get some original news? Or just join forces with other Apple blogs? Just about everyone who gets news about Apple goes to multiple sources and reads the same thing over and over. And if you a loyal TUAW fan, then you are just ignorant.
June 28 2010 at 6:35 PM Report abuse Permalink rate up rate down ReplyApple is making plenty from selling the iPhone- even at the rock bottom price fo $199. Trust me.
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TUAW (or The Unofficial Apple Weblog) is a website devoted to tips, reviews, news, analysis and opinion on everything Apple.
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